Stocks opened slightly higher yesterday, but by noon, a round of profit-taking resulted in a mild Dow sell-off for the best stock picks, while the Nasdaq was hammered with a 1%-plus loss. But the FOMC minutes from the Fed’s last meeting awakened buyers and stocks, led by the blue chips, rallied into the close. The Dow closed higher by 0.2%, the S&P 500 fell 0.13%, and the Nasdaq was down 0.38%.

The most important comment to come from the Fed’s minutes was that despite a stronger economy, the governors “generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase program.” They were, of course, referring to “quantitative easing” or “QE2.”

In corporate news, a host of downgrades from analysts drove the selling yesterday. The materials group was targeted by UBS (NYSE: UBS) as it cut its ratings on Vulcan Materials (NYSE: VMC), off 5%, and Martin Marietta Materials (NYSE: MLM), down 6.5%.

Food retailers were hit hard by downgrades from the Bank of Montreal (NYSE: BMO) and Morgan Stanley (NYSE: MS). Safeway (NYSE: SWY) fell 3.8%, Vitamin Shoppe (NYHSE: VSI) was off 4.6%, and The Kroger Co. (NYSE: KR) fell 1.4%.

Ford Motor Company (NYSE: F) reported a December sales increase of 17% for December 2009, and General Motors (NYSE: GM) said that its December sales rose 16% from the year-ago period.

In economic news, factory goods orders rose 0.7% in November versus an expected decline of 0.3%.

The prices of Treasury bonds and notes were virtually unchanged despite better economic data and continuation of “QE2.” The U.S. dollar had a strong day, up 0.3% versus a basket of currencies. Late Tuesday, the euro was trading at $1.3297 versus $1.3351 on Monday.

At the close, the Dow Jones Industrial Average rose 20 points to 11,691, the S&P 500 fell 2 points to 1,270, and the Nasdaq lost 10 points at 2,681. The NYSE traded 1.1 billion shares with decliners over advancers by 1.8-to-1. And on the Nasdaq, decliners were ahead by over 2-to-1 on volume of 518 million shares.

Crude oil for February delivery fell $2.17 to $89.38 a barrel. The Energy Select Sector SPDR (NYSE: XLE) closed at $68.17, off 59 cents. January gold fell $44.10 to $1,378.50 an ounce. The PHLX Gold/Silver Sector Index (NASDAQ: XAU) fell $4.75 to $219. The selling in both oil and gold was attributed by floor traders to profit-taking following the December run-up in both.

What the Markets Are Saying

Despite the early morning round of selling, the Dow managed to close at a new two-year high while the broader-based S&P 500 and Nasdaq suffered mild losses. An increase in the blue-chip index versus a decline in the Nasdaq indicates a possible shift to higher quality stocks by institutional buyers while cashing in on profits. This is all very healthy stuff, and is complementary to the change in sector leadership, known as “sector rotation,” mentioned here yesterday.

At the noon hour, there was much talk on CNBC of a possible head-and-shoulders forming in gold. And there was almost universal agreement that the run-up in gold was over until much later in the year. Participants scrambled to tell us that they had been short and/or were shorting gold, and that all commodities could be subject to massive selling.

Not so coincidentally, yesterday’s low in the SPDR Gold Shares (NYSE: GLD) was made just before 1 p.m. yesterday, at $134.16. The ETF rallied to close at $134.75, which is 13 cents above its 50-day moving average. In trading after the bell, GLD was up to $135.13.

Will gold break down? I have no idea if gold will break down, but I’ve said before that there is nothing more dangerous than the phrase “possible head-and-shoulders forming” in anything. The comment usually results in an immediate but shallow sell-off, and then a bounce. We heard the same comments from those interviewed in July of last year as GLD broke $116 after making a new high at $123.50. Within days, GLD reversed from a low of $113, and within a month was making new high ground.

Yesterday, gold futures posted their biggest one-day decline in eight weeks. But volatility in futures is normal, and even GLD has had many 8% to 10% rounds of profit-taking only to forge ahead to new high ground. Intermediate-term support for GLD rests at around $130, and a full-fledged correction could take it close to the 200-day moving average at around $123 as it did in July. But any retracement should be viewed as a long-term buying opportunity.

Dennis Gartman, who is recognized as a very successful futures investor, said: “I remain bullish of gold in non-US dollar terms … No, Tuesday’s action wasn’t fun. But do I think the bull market in gold has ended? Not really.” But he did opine that a correction could last for two to three weeks.

If you are a trader, you might want to cover your long positions in gold and other metals and even short into rallies. But if you are a long-term buyer/holder, then be prepared for a better buying opportunity.

For more on a specific buying opportunity in GLD, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.